There is uneasiness that, following the release of China's cotton policy, there will be pressure from Chinese buyers on Indian spinners to further reduce prices. In recent months, Chinese buyers have already lowered yarn buying rates, following the strengthening of the Indian rupee against the US dollar. Demand for cotton yarn has also been sluggish beginning from January. Export prices to China of 32's combed hosiery yarn prices which were quoting at $3.40 per kg in December and till the first fortnight of January have slipped by 20 cents in March, or down by around Rs 12 per kg at current exchange rates. "China has already resorted to measured imports of cotton yarn to largely keep prices under control", says Mr DK Nair, Secretary General of Confederation of Indian Textile Industry (CITI).

He said this in the backdrop of a perceived fall in yarn demand from China. China has reduced its cotton yarn import volumes from India in the last two months, which has put Indian yarn exports under pressure as Chinese cotton consuming textile mills were waiting for the Chinese cotton policy to be announced. As per the new policy to be applicable from April 1, the government has lowered cotton auction bids to 17,250 Yuan per ton, down 4.2 percent from its current floor price of 18,000 Yuan per ton, a move which can only stymie Chinese demand for Indian cotton as well as yarn. The importance of China as a valued export market for Indian yarn can be gauged from the fact that out of the 1,200 million kgs exported in the first ten months of fiscal 2013-14, China accounted for 55-60% of this figure.

"The main apprehension among Indian spinners is that there may be a little variation in Chinese yarn imports, but we may not be able to get the same prices that we were able to command in the same period last year", Mr T Rajkumar, Chairman of Southern India Mills Association (SIMA) informs. "However, according to SIMA estimates, over the long term, yarn exports to China may not fall drastically, but may stabilize or increase a little bit but prices may come under pressure ", he adds.